In a stark downturn, oil prices plummeted, nearing their lowest point in the past five months, as indicators of robust supplies continued to surface. West Texas Intermediate experienced a significant drop, falling by up to 3.4% and dipping below $69 per barrel, approaching levels not seen since late June. This descent marks the seventh consecutive week of decline, despite recent attempts by OPEC and its allies to implement production cuts, which failed to arrest the downward trend.
The latest evidence pointing to abundant supplies came in the form of a notable surge in the weekly average of Russia’s seaborne crude exports, reaching levels not seen since early July. This uptick underscores the persistent oversupply in the market. Additionally, spreads between monthly contracts indicate a surplus, with the front end of the Brent futures curve closing at its weakest level since June.
Dennis Kissler, Senior Vice President for Trading at BOK Financial Securities, commented on the situation, noting that futures are striving to establish a bottom following the previous week’s sell-off. Kissler emphasized the contango structure, where back-month futures outpace front-month ones, signaling an abundance of current supplies.
Oil is now navigating its lengthiest weekly losing streak since 2018, experiencing a decline of approximately one-fifth from its late September peak. The outlook for the first quarter appears gloomy, with forecasts predicting a slowdown in Chinese consumption growth and lingering recession risks in the United States, contributing to the negative sentiment.
Tamas Varga, an analyst at broker PVM Oil Associates Ltd., described the prevailing sentiment as negative, emphasizing that the fundamental backdrop is discouraging. The lack of support from the demand side further compounds the challenges faced by the oil market. Despite efforts to stabilize prices, the persistent oversupply and bleak demand outlook cast a shadow over the industry, leaving stakeholders grappling with the prolonged downturn.
In conclusion, as oil prices brace for their eighth consecutive week of decline, the industry faces mounting challenges amid persistent oversupply and a cautious demand outlook.
Source: Bloomberg
